FINDING A COMFORTABLE LEVEL OF RISK

KNOW YOUR RISK TOLERANCE
Are you uncomfortable with change? are you ready to stick with your long-term strategy albeit you face short-term losses? Will you be overly anxious the first time your investments drop in value? These are all inquiries to answer before developing your strategy.

Understanding your personal risk tolerance will assist you create a thought you'll stick with through good times and bad.

Many investors forget the risks involved buying stocks when the market is soaring. it's easy to be tempted by the lure of sky-high returns and to forget the likelihood of a market downturn, or worse, of a market . Likewise, during a market or a sharp drop in the market, many investors suddenly become extremely risk averse. But if you create a thought built around your personal risk tolerance and stick with that plan, you'll avoid having to make sudden changes in your investment strategy because the market changes.

FACTORS which can AFFECT YOUR RISK TOLERANCE
Although your personality will affect your underlying risk tolerance, your stage of life also will affect it. Are you simply getting started, supporting a growing family or approaching retirement? the number of risk you're feeling comfortable taking could even be very different at each of these stages in your life.

Most people aren't prepared for the danger posed by being 100% invested in stocks. But younger investors saving for retirement could even be able to afford the danger of placing the bulk of their money in stocks. Why? Because in modern U.S. stock market history, investors haven't lost real money investing over a 15-year period. Over a 10-year period, the probabilities of making money are quite 90%. So stocks have proven to be the only investment over the longer term and may likely still be unless the U.S. economy crashes to a halt.

On the other hand, as you progress closer to retirement, or if you will need a number of your money within the short term, you will be better off foregoing the absolute best returns and putting your money in investments that are safer , like bonds or market accounts.

But even investors with similar personalities and within an equivalent stage of life may have different risk tolerances thanks to such factors as:

Job security and future employment prospects. If you're employed in an industry with high turnover, you will be willing to risk but if you're during a stable position with room for growth.
The amount of income available for investing. If you're investing millions you will be easier taking risks than if you've only a few of thousand dollars to work with.
The risk of an unexpected financial burden. If you are the only income provider for your family, your tolerance could even be but if your spouse also earns an honest living.

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